Economic Overview
San Diego employment increased by 10,900 jobs, or 0.7% year-over-year (YOY), between August 2025 and August 2026, reflecting modest growth. Health care led employment gains, adding 12,300 jobs (+5.0% YOY), supporting the region's broader health care and research ecosystem. San Diego County's life sciences industry remains a cornerstone of the regional economy despite a 2.6% YOY decline in direct employment in 2025. The sector employed 61,866 workers across 1,919 establishments and generated $34.0 billion (B) in direct economic output. Biotechnology accounted for the largest share of life sciences employment, with 28,316 employees (-2.0% YOY), while biopharmaceutical employment increased to 11,301 employees (+0.8% YOY), reflecting mixed employment trends across the industry's major subsectors. Average annual wages of $203,124 underscore the industry's highly specialized workforce and its importance to the regional economy.
Federal research funding remains a critical driver of the region's innovation ecosystem. In 2025, San Diego organizations received $1.1B in combined National Institutes of Health and National Science Foundation funding. The life sciences industry supported a total of 155,621 jobs and generated $55.2B in total economic output, including direct, indirect and induced impacts.
While venture capital investment has become more selective and funding conditions remain volatile, San Diego benefits from federal research funding and an established network of research institutions. Major corporate commitments, including new research facilities and long-term leasing activity, demonstrate continued investment in the region despite headwinds.
San Diego's concentration of world-class research institutions, specialized talent and institutional funding provides a foundation for long-term laboratory demand, although near-term leasing conditions remain sensitive to funding availability and tenant expansion decisions. Looking ahead, total employment is projected to grow by 0.8% in 2026 and 0.2% in 2027, both below the five-year historical average of 1.8%, indicating continued selectivity among life sciences occupiers.
Supply and Demand
At the close of Q3 2026, overall vacancy rose to 27.6%, up from 27.0% last quarter and 25.6% a year ago, marking a new cycle high. Sublease vacancy declined to 565,000 square feet (sf), down 10 basis points (bps) quarter-over-quarter (QOQ) and 40 bps YOY. Sublease space remains concentrated in Sorrento Mesa, Torrey Pines and Sorrento Valley. Direct vacancy totaled 6.8 million square feet (msf), up 70 bps QOQ and 230 bps YOY. Total availability increased to 8.2 msf, comprising 7.2 msf of direct availability and 1.1 msf of sublease availability. New leasing activity totaled 307,000 sf in Q3 2026, up 4% QOQ but down 49% YOY.
Direct availability across core submarkets increased to 5.4 msf in Q3 2026. Sorrento Mesa recorded the highest direct availability rate at 39.4%, driven by new speculative (SPEC) deliveries, while accounting for 25% of new leasing activity during the quarter. Sorrento Valley followed at 32.8%, where several larger projects have pushed availability higher within a relatively small inventory base. In contrast, direct availability in Torrey Pines and UTC remained lower at 19.1% and 22.6%, respectively, with both submarkets continuing to attract tenant interest.
Countywide, the direct availability rate rose to 26.8% (7.2 msf) at quarter-end, up from 24.9% (6.5 msf) one year earlier. Sublease availability declined 10 bps QOQ and 60 bps YOY to 4.1% (1.1 msf), with Sorrento Valley recording the highest sublease availability rate at 8.2%.
Pricing
Average asking rent was $5.52 per square foot (psf) per month on a triple net basis, down 1.3% QOQ and 3.4% YOY. Elevated sublease availability continues to exert downward pressure on asking rents, as discounted, move-in-ready space competes directly with landlord-controlled inventory. Newly delivered SPEC developments continue to command the market's highest asking rents, reflecting tenant preferences for modern, purpose-built laboratory facilities. However, landlords are increasingly offering concessions and adjusting pricing to attract tenants with strong growth prospects and established management teams.
Future Inventory
Approximately 845,000 sf remains under construction, with 55.2% preleased. Build-to-suit projects account for 55% of the construction pipeline, while SPEC development represents the remaining 45%. UTC accounts for the largest share of active construction (55%), followed by Downtown (45%). However, elevated vacancy, workforce reductions at major life sciences firms and slower venture capital deployment continue to constrain new development, with no new SPEC projects anticipated to break ground in the near term. As a result, landowners who acquired development sites at peak valuations are reassessing their strategies, prioritizing existing asset stabilization and value creation over ground-up development.
